Japan Press Weekly

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2013 May 8 - 14 TOP3 [ECONOMY]

Behind ‘Abenomics,’ financial support to SMEs terminated

Calling for a “bold monetary easing” policy to be implemented, the Abe Cabinet’s “Abenomics” financial scheme is pouring a vast amount of funds into banks. Behind this move, financial support to struggling small- and medium-sized businesses was cut off.

The SME Finance Facilitation Act expired at the end of March. It was established after the Lehman Shock in the autumn of 2008 in order to prevent a chain reaction of smaller business bankruptcies. Although the expiration date of the temporary legislation was extended twice, the demand of small- and medium-sized business owners calling for a further extension of the law was ignored this time.

The law required financial institutions to make an effort to respond to requests from smaller business owners and housing loan borrowers to allow changes in the conditions for their loans, such as to prolong a moratorium on payments or to lower interest rates.

According to the government’s estimate, the law applied to 300,000 to 400,000 smaller business entities and was used to change conditions on more than 3.4 million cases of loans.

Why did the government insist on terminating the legislation at a time when it promotes monetary easing to offer funds to corporate activities?

As reason for the termination of the legislation, the Abe Cabinet claims that it may lead to “moral hazard” and that it has failed to push companies to come up with business improvement plans.

However, it is the recession, not the “moral hazard,” which has made it difficult for SMEs to repay their debts. It is also unreasonable to ask SMEs experiencing financial difficulties to immediately submit a business improvement plan.

While terminating the law providing a financial support to SMEs, which account for 99.7% of business entities in Japan, the government improves tax breaks for R&D investments and other measures to provide tax money to further support major corporations.